Many growing companies are vulnerable to changing market conditions and face pressure to evolve quickly. Having strong financial foundations and a strategic product roadmap are important to help your team meet growth goals.
Combining the expertise of 5th Line and thoughtbot, we’ve put together some actionable suggestions to help you plan for growth, and develop a clear vision for the path ahead. Companies that prioritize growth planning will find that they are more prepared to scale.
Let’s take a look at what goes into building reliable financial foundations and strategic product roadmaps.
Financial Foundations
Building strong financial foundations is critical for scaling. For companies managing change, financial strategies need to be just as dynamic. By focusing on an adaptable approach to budgeting, forecasting, and metrics, your team can make better decisions and allocate resources more effectively.
Here’s how to refine your strategy to stay agile and competitive:
1. Create a Rolling Budget
Think about how often you currently establish a budget. Traditional long-term budgets are often too rigid for the fluctuating realities of growing companies.
Growth-stage companies should consider adopting a rolling 12-month budget that gets updated to align with current results and conditions as frequently as every month or every quarter.
Financial foundations that can accommodate a continuously changing approach offer company leadership and your financial team the chance to respond promptly to shifting needs. As the picture of your overall financial health and stability changes, it’s easier to adjust resource allocation or spot financial risks before they escalate.
A rolling budget aligns more closely with the realities of a growing company. If you notice supply chain costs are suddenly increasing, having a rolling budget in place helps you account for changing expenses right away and keep your finances on track.
A flexible growth planning strategy will make you more efficient when overcoming economic uncertainty or seizing opportunities for growth.
2. Consider Debt Financing
For many companies, debt financing can provide a lifeline to growth efforts. And it’s becoming an increasingly popular option as access to venture capital is limited. In fact, the number of tech companies actively seeking debt increased by 87% between 2022 and 2023.
Growth-stage companies should evaluate their situation and financial foundations to determine whether debt can be used to support expansion efforts, including scaling operations, hiring new employees, and investing in new technologies.
When considering taking on debt, it’s important to consider the long-term costs. How much will you pay in total compared to the losses you incur when giving up equity?
Next, match your company’s specific growth goals to the types of debt that are best suited to that purpose. Short-term lines of credit can help with day-to-day operations and expenses, while term loans might be more useful for making long-term investments, such as building out new facilities or acquiring equipment.
While debt often comes with its own set of risks, the right deal can drive growth for your company without requiring your founding team to give up more equity. Proper growth planning involves establishing a clear plan for how new funds will be used and repaid, so be sure to weigh the costs of financing with the benefits it brings to your company as part of your broader growth strategy.
3. Develop Financial Models and Predictions
A part of your financial foundations that can be tricky to navigate are projections. Some involve educated guesses based on the economy, while others depend on assumptions. With a blend of both, you can ground your assumptions in data and reassess as new information comes out.
Here are some tips to help you get it right:
- Revisit growth assumptions regularly
- Plan for multiple scenarios
- Adjust for rising costs
- Consider external factors
Parts of forecasting might feel like guesswork, but with it, growth-stage companies can make more informed decisions about the future, track success more consistently, and ensure that growth is sustainable.
4. Refine CLV and CAC Models
Two of the most important metrics that will inform your financial foundations are Customer Lifetime Value (CLV) and Customer Acquisition Cost (CAC). Watching how these numbers change can provide useful insights into how efficiently you’re growing and whether your customer acquisition strategies are correct in the long run.
Scaling customer acquisition is one of the most direct ways to hit ambitious targets. While your growth planning should put customer acquisition front and center, it’s also important to confirm that the cost to acquire new customers aligns with their long-term value to the business. If your CAC is too high relative to your CLV, you may be investing too much in underperforming channels, which won’t help you increase profitability or build stable financial foundations.
Check in on these numbers to redistribute your marketing spend to the channels generating the greatest returns. Refining both your CLV and CAC metrics will help you reach your goals efficiently and sustainably. Need support with financial metrics and tracking? 5th Line can offer guidance and hands-on execution for your financial operations.
Product Roadmaps
A strong product roadmap keeps your team focused as you scale. To align your roadmap with growth goals, it’s important to revisit your target market, validate assumptions with research, and test new ideas before committing resources. Here’s how to refine your approach:
1. Refresh Target Audiences
You’ve gotten good traction with an audience, and your value proposition is resonating, but you need to uncover the right path for continued growth.
It might be time to go back and review your target audiences to see if you can learn more. A useful exercise to run as a team is brainstorming potential customer segments, and then prioritizing them by shared attributes. This can give you some audiences to engage along with new questions to ask.
2. Conduct Research and Challenge Assumptions
You can test new market segments or refresh your understanding of current audiences through high-quality research. This doesn’t need to be a multiple-month project, and you don’t need to talk to 30 people. By conducting even just five interviews virtually or in person, you might uncover insights that give you new ideas for where to go next.
The biggest mistake startups can make at any stage is moving forward with assumptions about their audience, the market, or their own vision. Using research to test and confirm assumptions is a foolproof way to move forward with confidence.
3. Run Experiments
At this point, you’ll have ideas for new features and services you are ready to explore with your audiences. Before you jump into building them, run some small experiments to test impact. You can use ads or a prototype as channels to gather more input. The goal is to pursue options for testing market viability that don’t require software development. This research will also provide you with feedback on the final implementation.
4. Revisit the Roadmap
To put all the pieces together, you’ll need to refresh your roadmap. As your product and company grow, you should maintain a roadmap of all work in priority order. This is a great tool for delivering updates in an agile fashion.
Review what you have, add the new elements, and prioritize. Make sure to keep growth goals in mind. If an element doesn’t tie directly back to them, it should probably be postponed or archived altogether. Old ideas don’t always fit as your company evolves—and that’s normal.
This exercise will also ensure your team is on the same page about what’s most important. Everyone will understand the need to connect product development to growth goals, back up changes with concrete findings, and set up a measurable output.
Final Thoughts
Ready to propel your company’s success with effective financial foundations and growth planning? Get in touch with 5th Line to learn more about financial management and growth strategies.
If you’re looking for more detail on how to conduct research and improve your product development process, your friends at thoughtbot have a number of free resources and can help you get both your product and product team headed in the right direction.
